Malaysian Economy Records Progress Despite Signs Of Pessimism
Malaysia exits its third quarter of 2023 in a very different position to where it was standing one year ago. The economic impact of the Covid pandemic is a distant memory, as is the political instability which had plagued the country throughout the pandemic period. Focus is now on long-term stability of the economy instead of recovery from shocks, and as the IMF notes in its quarterly report, Malaysia’s “strong macroeconomic policy frameworks, including a track record of fiscal prudence and a credible monetary policy framework, have served the country well”.
Nonetheless, this is seen against a backdrop of huge instability worldwide, not least the shocking developments in October with the Israeli bombardment of Gaza and the resulting geopolitical tensions which are being felt across the world. While Malaysia’s inflation problems have been significantly less than in many countries, largely thanks to significant subsidies, consumer sentiments and business confidence are nonetheless at a record low.
As the IMF notes, the issues facing Malaysia are largely external in nature. Notwithstanding, while the economy is currently in a healthy position, the risk of a downward turn in fortunes in the medium-term is significant, and is something for which the government and central bank must be well prepared.